Correlation Between Ormat Technologies and Oramed Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Ormat Technologies and Oramed Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ormat Technologies and Oramed Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ormat Technologies and Oramed Pharmaceuticals, you can compare the effects of market volatilities on Ormat Technologies and Oramed Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ormat Technologies with a short position of Oramed Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ormat Technologies and Oramed Pharmaceuticals.

Diversification Opportunities for Ormat Technologies and Oramed Pharmaceuticals

-0.45

Correlation Coefficient

Ormat Technologies  Oramed Pharmaceuticals

Very good diversification

The 3 months correlation between Ormat and Oramed is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Oramed Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oramed Pharmaceuticals and Ormat Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ormat Technologies are associated (or correlated) with Oramed Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oramed Pharmaceuticals has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Oramed Pharmaceuticals go up and down completely randomly.

Pair Corralation between Ormat Technologies and Oramed Pharmaceuticals

Assuming the 90 days trading horizon Ormat Technologies is expected to generate 0.1 times more return on investment than Oramed Pharmaceuticals. However, Ormat Technologies is 9.79 times less risky than Oramed Pharmaceuticals. It trades about 0.12 of its potential returns per unit of risk. Oramed Pharmaceuticals is currently generating about -0.31 per unit of risk. If you would invest  2,410,000  in Ormat Technologies on February 4, 2024 and sell it today you would earn a total of  105,000  from holding Ormat Technologies or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ormat Technologies  vs.  Oramed Pharmaceuticals

Ormat Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ormat Technologies may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Oramed Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oramed Pharmaceuticals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oramed Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ormat Technologies and Oramed Pharmaceuticals

The main advantage of trading using opposite Ormat Technologies and Oramed Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ormat Technologies position performs unexpectedly, Oramed Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Oramed Pharmaceuticals will offset losses from the drop in Oramed Pharmaceuticals' long position.

The idea behind Ormat Technologies and Oramed Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.